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Body and soul

I would hate to be in Chris Cummings’ shoes right now.

Barely had he recovered from the unwelcome news a fortnight ago that Robert Reid was refusing to renew his membership to Association of Independent Financial Advisers than it was revealed that a new trade body is being planned to rival Aifa.

According to Money Marketing last week, Thinc Group chief executive Simon Chamberlain is looking to create a new trade body which aims to represent all advisers from single ties to IFAs.

Chamberlain claims to have received a number of approaches from industry figures about creating this new organisation, which could be in place by the middle of this year.

I will stick my neck out and make a prediction. If such a body is set up – and I would not want to doubt for a minute the organisational capabilities of its founders – it will never replace Aifa. The overwhelming majority of IFAs want to belong to an organisation that represents IFAs only.

To understand that, you only have to go back to Aifa’s consultation process 18 months ago on what classes of advisers should be allowed to join.

Back then, according to Aifa, 80 per cent of existing members were willing to allow commission-based, whole-of-market advisers into their trade body but that openness was not unconditional. Whole-of market members would be confined to a separate sub-group, the Association of Financial Advisers.

Unlike Aifa’s other subsidiary, the Association of Mortgage Intermediaries, the new body was not allowed to have its own decision-making council.

By an equally big majority of 84 per cent, members voted against allowing multi-ties to join.

When the decision was announced, I described it as a potential mistake: “In exactly the same way as most advisers rightly want to keep their independent status, it is debatable whether all of them – even those who opt to remain as IFAs – will do little more than recommend a very limited number of providers’ products.

“Under those circumstances, all a multi-tie is really doing is doing away with some of the regulatory headaches that he or she faced as an IFA. Their concerns, hopes and fears are in large measure still those of their former independent colleagues. Yet some will be allowed into Aifa, others will not.”

Let us assume that few converts will flow from Aifa into the new trade body. What will it achieve? My guess is that, apart from keeping some potential members out of its IFA-only rival’s clutches, it will in the main manage to recruit only single and multi-ties into membership.

The evidence for that happening is currently slender in the immediate future, particularly given that the existing post-polarisation menu system successfully ensured that most IFAs have been able to keep their independent status while operating in much the same way as they did before the new rules came into force.

The impetus to become a multi-tie has so far not materialised. Of course, that could all change in the next few months and years, as the Treasury and FSA reviews of distribution and business models force changes on the industry and drive more IFAs in that direction.

The real issue, quite apart from the spoiling effect that such a new trade body might have on Aifa, is what kind of trade body IFAs ought to be demanding.

Last week, Cummings used his platform in Money Marketing to promise a vigorous response on behalf of members to the various reviews that are taking place. He repeated the mantra that there would be no attempt to answer “yesterday’s questions with yesterday’s answers”. There was the usual stuff about “fresh thinking, honest assessment and radical debate”, all taken out of the standard manual on how to come up with glib phrases while ironically stressing that “this is no time to trot out glib statements”.

Let me, as an outsider, pose a few questions to members of Aifa. Are you happy that the bulk of financial support for the organisation comes from a relatively small number of financial organisations, including national IFAs and networks?

Do you think Aifa has succeeded in recruiting many smaller individual IFA firms? If not, why not? Is this just a question of “free bus rider syndrome” where people want representation but do not want to buy a ticket? Are there more fundamental reasons?

Should there be scope for the promotion of professional development within a trade body? Do you think Aifa is achieving this successfully? Should Aifa confine itself solely to a representational role for IFAs? Can Aifa successfully fight its corner with the Treasury and FSA if it cannot defend the actions of all its grassroots members?

My final question is this. Are you proud to tell your clients that you are a member of Aifa? By that, I mean does it have at its core high ethical and moral principles, respected and followed by all its members?

If Aifa members can genuinely answer these questions in a positive way, then there is a role for a trade body for IFAs. If, on the other hand, you cannot answer some of them, especially my last one, then there is a strong argument for suggesting that Aifa is wasting its time.

In which case, maybe Chamberlain’s new organisation will be more successful that I predicted.


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